What a Contingent Home Means for Buyers and Sellers

When a home is listed as “contingent,” it indicates a seller has accepted an offer from a buyer, but the finalization of the sale depends on certain conditions being met. These conditions, known as contingencies, are typically outlined within the purchase agreement and serve to protect the interests of both the buyer and, at times, the seller. The presence of contingencies means the deal is not yet fully solidified, as either party may withdraw without penalty if the specified conditions are not satisfied.

Defining a Contingent Home

A “contingent home” refers to a property where an accepted offer exists, but the transaction’s completion hinges on specific conditions outlined in the sales contract. This status differentiates it from an “active” listing, where a property is still openly on the market seeking offers, or a “pending” status, which generally means all conditions have been met and the sale is moving directly towards closing. While a home is contingent, the seller typically cannot accept other primary offers, as they are contractually bound to the initial buyer until the contingencies are resolved. If the conditions are not met, the buyer often retains the right to withdraw from the agreement, usually without losing their earnest money deposit. This provides a safety net for buyers, allowing them to conduct necessary due diligence without the risk of being forced into a purchase that does not align with their expectations or financial capabilities.

Common Contingency Types

Several common types of contingencies are frequently included in residential real estate contracts, each designed to protect specific interests.

Home Inspection Contingency: This allows the buyer to hire a professional inspector to assess the property for any defects or issues. If significant problems are discovered, the buyer can negotiate repairs, a price reduction, or terminate the contract.
Appraisal Contingency: This ensures the home’s appraised value meets or exceeds the agreed-upon purchase price. Lenders typically require an appraisal before approving a mortgage. If the appraisal comes in lower than the sales price, the buyer may renegotiate the price or withdraw from the deal.
Financing (Loan) Contingency: This protects buyers who need to secure a mortgage. It provides a specified timeframe for the buyer to obtain loan approval. If they are unable to secure financing, they can typically cancel the contract without penalty and receive their earnest money back.
Home Sale Contingency: This allows a buyer to make their offer conditional on the successful sale of their current residence. This is useful for buyers who need the proceeds from their existing home to finance the new purchase. Sellers may view this as a higher risk due to added uncertainty and potential delays.

Other contingencies can include title contingencies, ensuring a clear title free of liens or disputes, and attorney review periods, allowing legal professionals to review and approve the contract terms.

The Contingency Period and Process

Once a seller accepts an offer with contingencies, the property enters the “contingent” status, and a specific timeframe begins for these conditions to be satisfied. Each contingency typically has a predetermined duration within the contract, ranging from a few days to several weeks or even months, depending on the complexity of the condition. For instance, an inspection contingency might allow for 7 to 14 days for the inspection to be completed and findings addressed. During this period, the buyer undertakes the necessary actions to fulfill the contingencies, such as scheduling a professional home inspection, applying for and securing a mortgage loan, or waiting for their current home to sell. For a financing contingency, buyers generally have between 30 to 60 days to obtain loan approval, which involves submitting financial documents to lenders and waiting for underwriting. An appraisal typically takes 7 to 20 days to complete, ensuring the property’s value supports the loan amount. Once a contingency is satisfied, the buyer formally “removes” or “waives” it, indicating they are ready to proceed with the transaction. If a contingency cannot be met within the agreed-upon timeframe, or if issues arise that are not resolved, the contract may be terminated. For example, if a home inspection reveals significant, unresolvable defects, the buyer may exercise their right to walk away from the deal, typically without penalty, and retrieve their earnest money deposit.

Impact on Buyers and Sellers

For buyers, contingencies provide important protection, allowing them a period of due diligence to ensure the property meets their expectations and that they can secure the necessary financing. These clauses offer an “out” from the contract without financial penalty if specified conditions, such as a satisfactory inspection or successful loan approval, are not met. For sellers, accepting a contingent offer means the home is effectively off the active market, but the sale is not guaranteed until all conditions are removed. This introduces uncertainty and potential for delays in the closing process. Sellers sometimes continue to market their property or accept “backup offers” during the contingency period, especially if a “kick-out clause” is included in the contract, which allows them to entertain other offers if the primary buyer fails to meet their contingencies quickly.